PT4_FABM1

1. THE OWNER-MANAGER BOUGHT A COMPUTER FOR PERSONAL USE.

THE INVOICE WAS GIVEN TO THE ACCOUNTANT WHO RECORDED IT AS
AN ASSET OF THE BUSINESS.

-The concept violated in the

problem is Entity because the
transaction is for personal use. The
Entity concept considers the
company to be a separate entity
from its owners and other
businesses in the world.

2. THE STATEMENT OF FINANCIAL POSITION OF A COMPANY INCLUDED

AN EQUIPMENT PURCHASED FROM JAPAN FOR 350,000 YEN. IT WAS
REPORTED AT THAT AMOUNT IN THE STATEMENT OF FINANCIAL
POSITION WHILE ALL THE OTHER ASSETS WERE REPORTED IN
PHILIPPINE PESOS.
-The principle violated in the problem is
a monetary unit because the currency
used is yen against the regulation. The
principle states that you can only record
business transactions with the same
currency from the records.
 PT4_FABM1

3. NO FINANCIAL STATEMENTS WERE PREPARED BY MICHAEL GO FOR

HIS BUSINESS. HE EXPLAINED THAT HE WILL PREPARE THE
STATEMENTS WHEN HE CLOSES THE BUSINESS, WHICH HE PREDICTS TO
TAKE PLACE AFTER 20 YEARS.

-Based on the problem, the

concept of periodicity is violated.
Because a company must report
its financial statements regularly,
the periodicity assumption could
take effect.

4. ASIDE FROM OWNING A SHOE STORE, ALBERT OPERATES A CANTEEN.

THE ASSETS OF THE CANTEEN ARE REPORTED IN THE STATEMENT OF
FINANCIAL POSITION OF THE SHOE STORE.

-No principle was violated

in the said statement. Both
businesses can be combined
or merged because they
have the same owner.
 PT4_FABM1

5. PURCHASED A HAMMER AT A COST OF PHP500. THIS WAS

RECORDED AS AN ASSET AND EXPENSE TO DECREASE ITS
VALUE BY PHP50 PER YEAR FOR 10 YEARS.

-In this case, the Historical cost is

being used. The firm should
record the purchase from their
original price and only
depreciation when the year-end
comes.

6. A FOOD COMPANY ORDERED A MACHINE NEEDED IN THE ASSEMBLY

LINE OF ITS PRODUCTION DEPARTMENT. UPON ORDER, THE MACHINE
WAS IMMEDIATELY LISTED AS ONE OF ITS ASSETS.
-We believe that no transaction will
be recorded to the accounts
because the purchased equipment
is not yet delivered, and it does not
say in the problem that the
equipment is paid. The machine
should arrive first before making a
recording of the accounts.

Rhainer C. Reyes
Jeremy Jei Yean -. Tan
Jhorie Claire P. Aculan
Yidah Hannah T. Jallorina
Abigail R. Marcelo
Gr. 11_ABM-Emilio Aguinaldo